Correlation Between Fubon MSCI and Hua Jung

Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Hua Jung at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fubon MSCI and Hua Jung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fubon MSCI Taiwan and Hua Jung Components, you can compare the effects of market volatilities on Fubon MSCI and Hua Jung and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fubon MSCI with a short position of Hua Jung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Hua Jung.

Diversification Opportunities for Fubon MSCI and Hua Jung

-0.51

Correlation Coefficient

Fubon MSCI  Hua Jung

Excellent diversification

The 3 months correlation between Fubon and Hua is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Hua Jung Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Jung Components and Fubon MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fubon MSCI Taiwan are associated (or correlated) with Hua Jung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Jung Components has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Hua Jung go up and down completely randomly.

Pair Corralation between Fubon MSCI and Hua Jung

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.43 times more return on investment than Hua Jung. However, Fubon MSCI Taiwan is 2.33 times less risky than Hua Jung. It trades about 0.17 of its potential returns per unit of risk. Hua Jung Components is currently generating about 0.01 per unit of risk. If you would invest  9,165  in Fubon MSCI Taiwan on January 30, 2024 and sell it today you would earn a total of  2,435  from holding Fubon MSCI Taiwan or generate 26.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.28%
Values	Daily Returns

Fubon MSCI Taiwan  vs.  Hua Jung Components

Fubon MSCI Taiwan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fubon MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Hua Jung Components

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Jung Components has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hua Jung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon MSCI and Hua Jung

The main advantage of trading using opposite Fubon MSCI and Hua Jung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Hua Jung can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hua Jung will offset losses from the drop in Hua Jung's long position.

The idea behind Fubon MSCI Taiwan and Hua Jung Components pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.